The IAMAI has warned that millions of e-mandates are set to fail from April 1, 2021, as most major banks are yet to comply with RBI’s new guidelines.

Online payment through cardImage for representation
Money Money Monday, March 29, 2021 - 16:38

Millions of bank customers who have set up recurring auto-debit payments for various services like mobile and utility bills, OTT (over-the-top) platforms and digital news subscriptions are set to face trouble from April 1 as these payments may not go through. This is because of the Reserve Bank of India’s (RBI) March 31 deadline on new rules for enabling Additional Factor Authentication (AFA) for recurring payments through debit and credit cards.

The Internet And Mobile Association of India (IAMAI) has warned that millions of customer e-mandates could fail from April 1, 2021, since most major banks have not taken requisite steps to comply with the RBI’s requirements for activating registration, tracking, modification and withdrawal of e-mandates.

Payment volumes worth over Rs 2,000 crore across sectors, including card, utility bills, OTT and media subscriptions along with MSMEs and corporates, are estimated to be affected in April. 

The RBI has issued two circulars to banks, non-bank prepaid payment instrument issuers, and authorised card payment networks for processing of e-mandates, the deadline for which expires on March 31, 2021. 

The new rule requires banks to send a notification to customers five days prior to the payment being deducted and allow the transaction to go through only after the customer approves it. For recurring payments above Rs 5,000, banks are also required to send a one-time password to customers. 

“Industry consultations suggest that most major scheduled commercial banks do not have upgraded capacities to comply. Due to this, the other participants in the ecosystem like acquirers and card networks have not been able to follow the obligations under these circulars,” the IAMAI said.

As a result, automatic monthly recurring payments through debit or credit cards for many services are likely to fail from April 1, till banks and merchants find an alternative. Till then, customers will have to pay bills or subscriptions by visiting the payment pages of individual merchants. However, recurring payments using UPI’s AutoPay feature won’t be affected.  

With banks like HDFC Bank, ICICI Bank, State Bank of India notifying network partners of their inability to process standing instructions on recurring payments, vendors have now started informing customers, suggesting alternative methods of payment. 

Asking Niti Aayog to take up the issue of timeline extension with the RBI, the IAMAI noted that it is important to appreciate that all banks will first need to enable such e-mandate-compliant frameworks, post which the other participants like merchants and PAs (payment aggregators) will need to build their technical integrations. 

Earlier this month, RBI had also asked banks, payment gateways, and other payment service providers to stop storing card details permanently, making recurring payments even more difficult. The central bank took this step, citing data leaks at payments processor Juspay and neo banking startup Chqbook. 

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